Review on HCL Tech

To begin with since this particular company currently doesn’t have institutional investors interest the valuations of company are looking pretty attractive, there are possibilities if the consistency of performance lasts it can very nearly become a favorite of institutional investors also

Lets start with Market Capitalization of the company, Currently the company is a large cap company with market capitalization of 1.4 lakh crore, The promoter holding in company is 60.33% with not even 1 paise of shares pledged, Normally we don’t see debt In IT Companies but there is a debt portion in HCL Tech, The debt to equity ratio currently is 0.15 which obviously is not a great concern, A little debt might be one of the reason why the company has faced resistance from institutional investors when compared with other companies of the same sector, If we check out the Interest coverage ratio it is more than 28+ which clearly indicates Debt of HCL doesn’t have any significant negative role

Return on Equity (ROE) of HCL tech is 25.5% while the return on capital employed is 30.6% which is a very positive sign which indicates company is utilizing and generating decent amount of returns from its debt also, Dividend yield is currently around 1%
In terms of valuation, Current Price to earning ratio is 12.7, If we look into historical valuation the PE was around 15-17 from past 3 to 5 years, Definitely company is providing good valuation currently, If we look into sales growth, It is far attractive than TCS, Last 10 years CAGR being 23% 5 years 18.7% last 3 years at 24.7% which is really healthy and with net profit growth at 22% from last 3 years, If we look into downside risk company is well placed , Operating margin is consistently increasing, Long term perspective growth and earning perspective HCL is well placed

Q4 2020 company was able to post 2.5% increase in revenue & a 3.8% increase in Net profit, Whole year net profit number is 11,062 crore an increase in 9.3%
An employee addition of 10,278 in FY20, with closing headcount nearly 1.5 lakh employees, more number of clients are getting added, with a diversified approach, Company doesn’t depend now only on top 3 or 4 clients and it steadily has increased its client base

Industry is not a capital intensive one but into service so there won’t be a operating strain, Primarily human capital oriented company and I don’t have to tell how they can manage the cost, Job cuts is not a new thing to service sector, As an investor it’s important that it doesn’t have operating concern

Financial service contributes 22% in growth of HCL and Manufacturing 18%, Tech & service contributes 16.2%, in fact has degrown by 3%
Currently we term it as a value stock which one can consider in their portfolio

Thank you, Signing off
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